Florida mortgage lender leaves Connecticut deals dry

Published 7:10 pm, Monday, August 31, 2009

Fifteen home buyers in Connecticut are scrambling to fund mortgages they thought they had closed, after a Florida-based mortgage lender went under.

State Banking Department Commissioner Howard Pitkin said Wednesday his department is trying to find funding for buyers whose mortgages were being funded by Taylor Bean & Whitaker Mortgage Co. of Florida.

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An exact cause of TBW's problems has not been stated. The company did not return calls for comment Wednesday.

Last year, there were 97 wholesale lenders," Spalthoff said. "Now, there are 13."

He said most major and regional banks won't lend through brokers, so the wholesale lenders like TBW are the main players in the field.

But the real shame is the way this could color one's experience.

"It's one of the best moments in your life," Spalthoff said of buying a home. "You have kids, your wedding and your home."

On Wednesday, the State Banking Department issued a temporary cease and desist order against the company and notified TBW it is facing a license revocation, a fine of up to $600,000 and other regulatory action, for its alleged failure to fund 15 closings since Aug. 3. The company also allegedly failed to pay closing loans on time between April 1 and Aug. 3. The department would not identify the names or homes affected.

The department is also demanding TBW "reimburse each Connecticut consumer the amount necessary to put the consumer in the same position as if [TBW] had funded the mortgage loan under the terms and conditions agreed upon for the scheduled closing of the loan."

In a phone interview, Pitkin said his first concern is the consumer and his agency is looking for more people that might have been affected by this problem. He asked them to call the department.

"It is a liquidity issue," he said of TBW's closing. Pitkin said the Florida lender has cooperated with his staff.

TBW does not have any offices in Connecticut, but is licensed as a mortgage lender in the state. It provides loans through brokers. Besides its main office in Ocala, Fla., TBW offices in Florida, Georgia, Pennsylvania and Massachusetts have licenses to make mortgage loans in Connecticut.

Pitkin said his department started to monitor TBW in January after regulatory press began reporting on potential problems. He said in April late funding of loans began to generate complaints and an investigation was launched.

The commissioner said as soon as the department had clear evidence it issued the temporary cease and desist order.

According to department documents, between April 1 and Aug. 6, TBW failed to pay the loan proceeds for 110 residential mortgage loans secured by first mortgages.

"When this happens, it's havoc," Pitkin said, describing a chain reaction of problems set off by the failure to fund the loan. Besides affecting the homeowner, the lawyers, real estate agents and other professionals don't get paid.

Besides trying to help the homebuyers complete their transactions, Pitkin also wanted to calm anyone who has existing loans from TBW. He said people paying their mortgages should continue to pay them.

The company announced on Aug. 5 it would cease all mortgage loan originations immediately. Reuters reported TBW's offices were raided by the FBI earlier this month as TBW's problems mounted. The U.S. Department of Housing and Urban Development and the Federal Housing Administration suspended TBW from underwriting FHA-insured loans on Aug. 4.

Spalthoff said finding another lender to provide the same terms in most cases should not be difficult, but he cautioned buyers that market rates can change and push up interest rates and other lenders might offer different terms because they see the deal differently. He also said the deal will probably require a new appraisal. He said the important thing is to contact the broker immediately.

But Spalthoff said when he was active in the brokerage game he would eat these costs himself.